Beware Falling Profit Estimates

This market is more richly valued than you think, but opportunities still exist. Five stocks that look attractive, three to avoid.

Despite high expectations for earnings growth at the start of the year, U.S. companies delivered only ho-hum results for the second quarter, and estimates for the current quarter are plummeting. Downward revisions of fourth-quarter estimates can't be far behind.

That's not to say that this market is going to crash, last week's 2% drop notwithstanding. But stocks aren't as cheap as they look, either.